AHT Ashford Hospitality Trust Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported):  February 26, 2015

ASHFORD HOSPITALITY TRUST, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (972) 490-9600

Check the appropriated box if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o                        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                        Soliciting material pursuant to Rule 14-a-12 under the Exchange Act (17 CFR 240.14a-12)

o                        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                        Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On February 26, 2015, Ashford Hospitality Trust, Inc. (the “Company”) issued a press release announcing its financial results for the fourth quarter ended December 31, 2014.  A copy of the press release is attached hereto as Exhibit 99.1.

The information in this Form 8-K and Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

ITEM 9.01.  FINANCIAL STATEMENTS AND EXHIBITS

Exhibits

99.1                        Fourth Quarter 2014 Earnings Press Release of the Company, dated February 26, 2015.

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SIGNATURE

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated:  February 26, 2015

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Exhibit 99.1

ASHFORD TRUST REPORTS FOURTH QUARTER AND

YEAR END 2014 RESULTS

11.3% RevPAR Increase for All Hotels for the Fourth Quarter

Hotel EBITDA Margin Increase of 194 basis points for All Hotels

Completes Spin-Off of Ashford Inc.

Announces Formation of Ashford Hospitality Select

DALLAS, February 26, 2015 —Ashford Hospitality Trust, Inc. (NYSE: AHT) (“the Company” or “Ashford Trust”) today reported financial results and performance measures for the fourth quarter ended December 31, 2014.  The performance measurements for Occupancy, Average Daily Rate (ADR), Revenue Per Available Room (RevPAR), and Hotel Operating Profit (or Hotel EBITDA) are pro forma.  Unless otherwise stated, all reported results compare the fourth quarter ended December 31, 2014, with the fourth quarter ended December 31, 2013 (see discussion below).  The reconciliation of non-GAAP financial measures is included in the financial tables accompanying this press release.

FINANCIAL AND OPERATING HIGHLIGHTS

·                  During the quarter, the Company completed the spin-off of Ashford Inc., which started trading under the ticker symbol “AINC” on November 13, 2014, on the NYSE MKT Exchange

·                  RevPAR for all Ashford Trust hotels increased 11.3% during the quarter

·                  RevPAR for all Ashford Trust hotels not under renovation increased 12.6% during the quarter

·                  Hotel EBITDA increased 17.6% for all Ashford Trust hotels

·                  Hotel EBITDA Margin increased 194 basis points for all Ashford Trust hotels

·                  Hotel EBITDA flow-through was 49% for all Ashford Trust hotels

·                  Net loss attributable to common stockholders for the Company was $22.4 million, or $0.25 per diluted share, compared with net loss attributable to common stockholders of $25.9 million, or $0.32 per diluted share, in the prior-year quarter

·                  Adjusted funds from operations (AFFO) for the Company was $0.17 per diluted share for the quarter as compared with $0.14 from the prior-year quarter

·                  The prior year results include the operations of the Ashford Prime Portfolio prior to its spin-off from Ashford Trust completed on November 19, 2013

·                  On December 19, 2014, the Company announced a definitive agreement in which Ashford Trust will acquire the remaining 28.26% ownership interest of the Highland Hospitality Portfolio from its joint venture partner, Prudential Real Estate Investors

·                  Subsequent to the quarter end, on January 5, 2015 the Company announced it had refinanced two mortgage loans with an outstanding balance of approximately $354 million with new loans totaling $478 million resulting in over $100 million of excess proceeds after closing costs and reserves

·                  On January 29, 2014, the Company announced a plan to form Ashford Hospitality Select (“Ashford Select”), dedicated to investing primarily in premium-branded select-service hotels, including extended

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stay hotels in the U.S.

·                  On January 30, 2015 the Company priced a follow-on public offering of 9,500,000 shares of common stock at $10.65 per share.  The underwriter subsequently exercised its option in part and purchased an additional 1,029,450 shares from the Company.  In total, the Company issued 10,529,450 shares of common stock at $10.65 per share for net proceeds of $111.1 million.

·                  On February 9, 2015, the Company closed on the acquisition of the 168-room Lakeway Resort & Spa in Austin, TX for a total consideration of $33.5 million ($199,000 per key)

·                  On February 25, 2015, Ashford Trust closed on the acquisition of the 232-room Marriott Memphis East hotel for total consideration of $43.5 million in cash ($187,500 per key)

CAPITAL EXPENDITURES

·                  Capex invested in the quarter for the Ashford Trust Portfolio was $28.6 million, bringing the full-year total to $120.1 million

CAPITAL STRUCTURE

At December 31, 2014, the Company had total assets of $2.8 billion in continuing operations, and $3.6 billion overall including the Highland Hospitality Portfolio which is not consolidated.  As of December 31, 2014, the Company had $2.0 billion of mortgage debt in continuing operations and $2.8 billion overall including the Highland Hospitality Portfolio.  Ashford Trust’s total combined debt had a blended average interest rate of 5.3%.

On November 12, 2014, the Company completed the sale of the 86-room Homewood Suites Mobile for total consideration of $7.4 million ($86,000 per key).  The sale, including anticipated capital expenditures, represented a trailing 12-month cap rate of 7.4% on net operating income and a trailing 11.8x EBITDA multiple.

On December 19, 2014, the Company announced the acquisition of the remaining 28.26% ownership interest of the Highland Hospitality Portfolio from its joint venture partner.  The 28-hotel Highland Hospitality Portfolio includes 19 full-service hotels and 9 select-service hotels with a concentration in major brands such as Hilton, Marriott, Hyatt and Starwood.  The total transaction value is valued at $1.735 billion ($215,000 per key) and the purchase price represents a forward 12-month cap rate of 7.5% on net operating income and an 11.6x forward EBITDA multiple.  The closing of the acquisition is contingent on a refinancing of the portfolio, and it’s expected to close sometime during the first quarter of 2015.

On January 5, 2015, the Company announced it had successfully refinanced two mortgage loans with an existing outstanding balance of approximately $354 million.  The two previous mortgage loans that were refinanced include: a $211 million Goldman Sachs Floater loan with a final maturity date in November 2017; and a $143 million Merrill Lynch 1 loan with a final maturity date in July 2015.  The new loans total $478 million and resulted in excess net proceeds of over $100 million after closing costs and reserves.

On January 30, 2015, the Company announced it had priced a follow-on public offering of 9,500,000 shares of common stock at $10.65 per share.  Settlement of the offering occurred on February 4, 2015, generating total net proceeds of $100.2 million.  The underwriter subsequently exercised its option in part and purchased an additional 1,029,450 shares from the Company.  In total, the Company issued 10,529,450 shares of common stock at $10.65 per share for net proceeds of $111.1 million.

On February 9, 2015, the Company announced it had closed on the acquisition of the 168-room Lakeway Resort & Spa for a total consideration of $33.5 million ($199,000 per key).  Located in the thriving Austin, TX market, the hotel features approximately 24,000 square feet of meeting space.  Upon closing, the property will be managed by Remington Lodging.  The purchase price of $33.5 million represents a forward 12-month cap rate of 8.7% on net operating income, which equates to an estimated 9.5x forward EBITDA multiple.

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On February 25, 2015, the Company closed on the acquisition of the 232-room Marriott Memphis East hotel for total consideration of $43.5 million in cash ($187,500 per key).  Located in the heart of East Memphis just minutes away from nearby attractions such as Elvis’ Graceland, Beale Street and Historic Downtown Memphis, the hotel has 6 meeting rooms with approximately 8,960 square feet of meeting space. Upon closing, the property will be managed by Remington Lodging.  The purchase price of $43.5 million represents a forward 12-month cap rate of 8.6% on net operating income and an estimated 10.3x forward EBITDA multiple.

PORTFOLIO REVPAR

As of December 31, 2014, the Ashford Trust Portfolio consisted of direct hotel investments with 115 properties classified in continuing operations.  During the fourth quarter of 2014, 103 of the Ashford Trust Portfolio hotels included in continuing operations were not under renovation.  The Company believes reporting its operating metrics for the Ashford Trust Portfolio hotels in continuing operations on a pro forma total basis (all 115 hotels) and pro forma not under renovation basis (103 hotels) is a measure that reflects a meaningful and focused comparison of the operating results in its portfolio.  Details of each category are provided in the tables attached to this release.

·                  Pro forma RevPAR increased 11.3% to $97.61 for all hotels in the Ashford Trust Portfolio on a 6.5% increase in ADR and a 4.5% increase in occupancy

·                  Pro forma RevPAR increased 12.6% to $97.95 for hotels not under renovation in the Ashford Trust Portfolio on a 6.5% increase in ADR and a 5.7% increase in occupancy

HOTEL EBITDA MARGINS AND QUARTERLY SEASONALITY TRENDS

The Company believes year-over-year Hotel EBITDA and Hotel EBITDA Margin comparisons are more meaningful to gauge the performance of the Company’s hotels than sequential quarter-over-quarter comparisons.  Given the substantial seasonality in the Company’s portfolio and its active capital recycling, to help investors better understand this seasonality, the Company provides quarterly detail on its Hotel EBITDA and Hotel EBITDA Margin for the current and certain prior-year periods based upon the number of hotels in the Ashford Trust Portfolio, including its pro-rata share of the Highland Hospitality Portfolio as of the end of the current period.  As the Company’s portfolio mix changes from time to time so will the seasonality for Pro forma Hotel EBITDA and Pro forma Hotel EBITDA margin.  The details of the quarterly calculations for the previous four quarters for the 115 Ashford Trust hotels are provided in the table attached to this release.

ASHFORD, INC. SPIN-OFF

On November 12, 2014, the Company completed the previously announced spin-off of Ashford Inc. (NYSE MKT: AINC) (“Ashford Inc.”).  Starting November 13, 2014, Ashford Inc. began trading on the NYSE MKT under the ticker symbol “AINC.” Following the spin-off, Ashford Inc. is now an independent publicly traded asset management company focused on managing real estate, hospitality, and securities platforms both domestically and internationally.  Ashford Inc. currently advises Ashford Trust and Ashford Hospitality Prime, Inc. (NYSE: AHP) (“Ashford Prime”).

Ashford Trust completed the spin-off by distributing a pro-rata taxable dividend of Ashford Inc. common stock to Ashford Trust common stockholders of record as of the close of business of the NYSE on November 11, 2014 (the “Record Date”).  The distribution was based on a distribution ratio of one share of Ashford Inc. common stock for every 87 shares of Ashford Trust common stock held by such stockholder on the Record Date.  An information statement concerning the details regarding the distribution of Ashford Inc. common stock and its business following the spin-off was mailed to Ashford Trust stockholders on the distribution date.

COMMON STOCK DIVIDEND

On December 15, 2014, the Company announced that its Board of Directors had declared a quarterly cash

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dividend of $0.12 per diluted share for the Company’s common stock for the fourth quarter ending December 31, 2014, payable on January 15, 2015, to shareholders of record as of December 31, 2014.

The Board also approved the Company’s dividend policy for 2015.  The Company expects to pay a quarterly cash dividend of $0.12 per share for 2015, or $0.48 per share on an annualized basis.  The Board will continue to review its dividend policy on a quarter-to-quarter basis.  The adoption of a dividend policy does not commit the Board of Directors to declare future dividends or the amount thereof.

“During the fourth quarter we continued to display superior RevPAR and EBITDA growth, driven largely by the initiatives we began to implement in 2013 to improve RevPAR performance.  These initiatives began to show results during the third and fourth quarters and we expect to see further improvement over time,” commented Monty J. Bennett, Ashford Trust’s Chairman and Chief Executive Officer.  “In 2015, we continue to pursue attractive investment opportunities as well as alternative ways to invest in accretive growth.  Our recent formation of Ashford Select is one of these avenues as we look to benefit from attractive dynamics of the select service space.  Additionally, improving economic trends continue to drive growth in the lodging sector which is benefitting our overall portfolio.  We also plan to take advantage of the favorable capital markets conditions to proactively address our debt maturities and generate excess cash to strengthen our balance sheet and shore up liquidity for attractive asset acquisition opportunities.  Going forward, you can expect us to keep pursuing these strategies with the goal of balancing risk mitigation while seeking to generate attractive returns for our shareholders.”

INVESTOR CONFERENCE CALL AND SIMULCAST

Ashford Hospitality Trust, Inc. will conduct a conference call on Friday, February 27, 2015, at 11:00 a.m. ET.  The number to call for this interactive teleconference is (785) 830-7991.  A replay of the conference call will be available through Friday, March 6, 2015, by dialing (719) 457-0820 and entering the confirmation number, 6219218.

The Company will also provide an online simulcast and rebroadcast of its fourth quarter 2014 earnings release conference call.  The live broadcast of Ashford Hospitality Trust’s quarterly conference call will be available online at the Company’s web site, www.ahtreit.com on Friday, February 27, 2015, beginning at 11:00 a.m. ET.  The online replay will follow shortly after the call and continue for approximately one year.

Substantially all of our non-current assets consist of real estate investments and debt investments secured by real estate.  Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, most industry investors consider supplemental measures of performance, which are not measures of operating performance under GAAP, to assist in evaluating a real estate company’s operations. These supplemental measures include FFO, AFFO, EBITDA, and Hotel Operating Profit.  FFO is computed in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the NAREIT definition differently than us.  Neither FFO, AFFO, EBITDA, nor Hotel Operating Profit represents cash generated from operating activities as determined by GAAP and should not be considered as an alternative to a) GAAP net income (loss) as an indication of our financial performance or b) GAAP cash flows from operating activities as a measure of our liquidity, nor are such measures indicative of funds available to satisfy our cash needs, including our ability to make cash distributions.  However, management believes FFO, AFFO, EBITDA, and Hotel Operating Profit to be meaningful measures of a REIT’s performance and should be considered along with, but not as an alternative to, net income and cash flow as a measure of our operating performance.

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Ashford Hospitality Trust is a real estate investment trust (REIT) focused on investing opportunistically in the

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hospitality industry across all segments and at all levels of the capital structure primarily within the United States.

Follow Chairman and CEO Monty Bennett on Twitter at www.twitter.com/MBennettAshford or @MBennettAshford.

Ashford has created an Ashford App for the hospitality REIT investor community.  The Ashford App is available for free download at Apple’s App Store and the Google Play Store by searching “Ashford.”

Certain statements and assumptions in this press release contain or are based upon “forward-looking” information and are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to risks and uncertainties.  When we use the words “will likely result,” “may,” “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” or similar expressions, we intend to identify forward-looking statements.  Such statements are subject to numerous assumptions and uncertainties, many of which are outside Ashford Trust’s control.

These forward-looking statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated, including, without limitation:  general volatility of the capital markets and the market price of our common stock; changes in our business or investment strategy; availability, terms and deployment of capital; availability of qualified personnel; changes in our industry and the market in which we operate, interest rates or the general economy; the degree and nature of our competition; and the satisfaction of conditions to, or the completion of, the proposed launch of Ashford Select.  These and other risk factors are more fully discussed in Ashford Trust’s filings with the Securities and Exchange Commission.  EBITDA is defined as net income before interest, taxes, depreciation and amortization.  EBITDA yield is defined as trailing twelve month EBITDA divided by the purchase price.  A capitalization rate is determined by dividing the property’s annual net operating income by the purchase price.  Net operating income is the property’s funds from operations minus a capital expense reserve of either 4% or 5% of gross revenues.  Hotel EBITDA flow-through is the change in Hotel EBITDA divided by the change in total revenues.  Hotel EBITDA Margin is Hotel EBITDA divided by total revenues.  Funds from operations (“FFO”), as defined by the White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) in April 2002, represents net income (loss) computed in accordance with generally accepted accounting principles (“GAAP”), excluding gains (or losses) from sales of properties and extraordinary items as defined by GAAP, plus depreciation and amortization of real estate assets, and net of adjustments for the portion of these items related to unconsolidated entities and joint ventures.

The forward-looking statements included in this press release are only made as of the date of this press release.  Investors should not place undue reliance on these forward-looking statements.  We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or circumstances, changes in expectations or otherwise.

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

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 ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

 RECONCILIATION OF NET LOSS TO EBITDA AND ADJUSTED EBITDA

 (in thousands)

 (unaudited)

(1)         Other income, primarily consisting of income from interest rate derivatives and net realized gain/loss on marketable securities in both periods, is excluded from Adjusted EBITDA. 

 RECONCILIATION OF NET LOSS TO FUNDS FROM OPERATIONS (“FFO”) AND ADJUSTED FFO

 (in thousands, except per share amounts)

 (unaudited)

(1)          Other income, primarily consisting of net realized gain/loss on marketable securities in both periods, is excluded from Adjusted FFO. 

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ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES

ASHFORD TRUST (INCLUDING 71.74% PRO RATA SHARE OF HIGHLAND HOSPITALITY PORTFOLIO)

SUMMARY OF INDEBTEDNESS

DECEMBER 31, 2014

(dollars in thousands)

(unaudited)